The increase in the development of new drugs in Japan which will create opportunities for both international partners and domestic manufacturers of active pharmaceutical ingredients (APIs ) and excipients , will be a major driver of the API market which has been consistently improving in the last few years, according to some of the industry experts.
In the near future, other Asian countries are expected to increase their API exports to Japan. Italy continues to maintain a steady place in the Japanese market among API suppliers. Due to higher utilisation, a lot of Japanese pharmaceutical companies have come up with cost-effective production units for development and also fabricated their outsourcing with regard to APIs.
The global API market is expected to reach US$205.51 billion by 2020 from US$150 billion in 2015, at a CAGR of 6.5 per cent during the forecast period. The API market in Asia is growing at a rapid pace. From 2007 to 2011, it went from 24.5 to 28.5 per cent of the world market. From now through 2017, it should expand at a rate of 8.2 per cent annually. This it puts Asia’s API market worth $33 billion currently at more than $50 billion by 2017.
Japan has long led the rest of Asia in demand for APIs. In 2012, the market for APIs in Japan was the largest in Asia, at $15.5 billion. Many foreign API firms from India, Europe and the US are actively selling their APIs on the Japanese market. Japan’s share of innovator APIs is high, and demand is growing especially in the biotech drug sector. But API generics are also starting to gain ground in Japan. Chinese and Indian firms have recently flooded Japan’s market with inexpensive APIs. The accompanying price competition has forced some Japanese API manufacturers out of their own domestic market. An increasing number of foreign pharmaceutical companies are selling APIs on the Japanese market. Sometimes they sell to domestic drug manufacturers and sometimes they sell to foreign drug companies manufacturing products in Japan.
If foreign API manufacturers pay attention to the Japanese API market, they will find excellent sales opportunities, especially in the innovative and generic API segments. Stakeholders include manufacturers of API distributors and suppliers of APIs, potential investors in the API market, pharmaceutical companies, biotechnology companies, contract manufacturing organisations and healthcare players.
Japan has emerged as a focus market for Indian bulk drug makers and active API makers like Ahmedabad-based Dishman Pharmaceuticals, Hyderabad-based Suven Lifesciences and Chandigarh-based Ind-Swift Labs have initiated steps to tap the Japanese market. The USFDA scrutiny of Ranbaxy facility is a pointer to this, while this is not the first instance in the world that pharmaceutical alliances have to undergo a rough patch, this in effect is a course correction for ensuring quality and compliance where human health is involved. India also has a free trade agreement with Japan, which also aids in forming alliances with Japanese companies.
As Chinese and Indian firms flood the Japanese market with cheaper API alternatives, price competition has made it difficult for Japanese API manufacturers to do business in their own market. According to Japan Pharmaceutical Manufacturers’ Association (JPMA), the growth in pharmaceutical import from 1994 to 2004, 432 billion yen to 769 billion yen is equal to 78 per cent increase. Moreover, the export of Japan was 158 billion in 1994 to 383 billion yen in 2004. In the span of 10 years, its export has increased by 142 per cent. Currently its largest Asia market was Japan's with a value of $16 billion and Asia's API market worth $32 billion and, in-future to be $55 billion. Japan has led in API demand and numerous US and Europe firms are active in term of API selling in Asia market.
A few years back, Japan had decided to switch from expensive patented drugs to cheaper generic versions. Also, the expiry of patents of several blockbuster drugs, threw up an opportunity for generic drug makers, and, in turn, for API makers who supply ingredients to formulation makers.
Indian pharmacy has sighted opportunities in Japan to strengthen their generics marketing opportunities. Lupin and Zydus have acquired companies in that country. While Lupin went in for two buyouts Kyowa in 2007 and I’rom in 2011, Zydus in 2007 bought Tokyo-headquartered Nippon Universal Pharmaceutical to spearhead into the generic markets. Dr Reddy’s Labs, Aurobindo Pharma, and Dishman too have beefed up their presence in the region by setting up offices in Japan. The Government of India has inked the first multilateral trade agreement referred to as the India-ASEAN Free Trade Agreement (FTA, 2009) at Bangkok. The Look Far East Policy (1993) and the Comprehensive Economic Partnership Agreement (CEPA) are expected to help the country to widen prospects of growth under these economic initiatives and makes easier for Indian pharmacy to look at Japan, according to the Institute of Economics and Social Change.
As more Japanese companies are seeking opportunities outside Japan's shores, foreign companies have been finding significantly more success in penetrating the Japanese market in recent years. Traditionally international firms have struggled to adapt to Japan's regulatory system and working culture, but today most major pharmacy companies maintain a successful presence, despite occasional incidents like Novartis' recent threat of suspension by the Japanese ministry of health, labour and welfare over allegations of data manipulation. Government reform like greater harmonisation with the EU and US regulatory regimes and R&D tax credits have helped persuade companies to set up shop in Japan. The country has gradually become a popular destination for multi-regional clinical trials (MRCTs) since 2006, when bridging studies - studies to determine whether foreign trial results are relevant to patients in Japan - were allowed to be included in MRCTs, shortening the time and expense involved in getting new drugs to Japanese patients safely.
Additionally, Japan is also attempting to incentivise a much higher use of generic drugs which have struggled to find a place in the market until recently - as a means to reduce healthcare spending. Unconfirmed reports suggest the government wants generic penetration of 60 per cent in 2017, up from just 30 per cent in 2014.